If you’re setting up your own limited company, then you’re bound to be full of questions. Not only does setting up limited company involve more administration and regulation, but it also costs a lot more than the sole trader route too. However there are some benefits to setting up a limited company, like the finances for example.
Sole traders are solely responsible for their business finances, and if a sole trader’s business gets into considerable debt, then they could be declared bankrupt – there is no separation between personal and business finances. Limited companies on the other hand provide protection from debt, and employees are not responsible for any debt incurred by the business. Let’s take a look at what is needed to set up a limited company.
Why A Limited Company?
Limited companies are treaded as separate legal entities, and that means that they are entirely responsible for their own actions. Depending on what type of limited company you want to set up, there are a number of regulations that you must adhere to. For example, private limited companies can have a number of shareholders, but the company’s shares cannot be sold on the stock market. Public limited companies on the other hand can sell their shares on the stock market.
As a director of a limited company, your financial risk is only limited to the amount of money that you have invested, provided that the company does not trade recklessly. In order to take out bank loans in your company’s name however, a director will have to provide personal guarantees for that company. In a nutshell, if you’re looking to attract partners or investors, then running your company as a private limited company may make you appear more credible.
Setting Up A Limited Company
The first step to setting up your limited company is to register online at Companies House. Companies House resides under the remint of the Department of Business, and is an Executive Agency of the Government. Usually for a small fee, accountants or solicitors will register your company for you – all you’ll have to do is provide a few basic details and your signature.
If you prefer, ready-made limited company names are available to buy, just in case you can’t come up with your own. If you want to set up a completely original company however, you will need to send a memorandum of association, as well as a completed IN01 form and articles of association to Companies House. Memorandums and articles are not supplied by Companies House, but can be bought from company-forming agents or legal stationers.
Director Responsibilities
By law, private limited companies must have at least one director. This director can also be a shareholder in the company, however they will not be able to assume the role if they have ever been disqualified from a previous company as a director. Furthermore, limited company directors are also classed as employees of the company, meaning they must pay income tax and national insurance. Additionally, unlike public limited companies, private limited companies don’t need to appoint a company secretary.
Visit Brookson at http://www.brookson.co.uk/ to find out more on setting up a limited company.